Correlation Between HNX 30 and Thanh Thanh

Can any of the company-specific risk be diversified away by investing in both HNX 30 and Thanh Thanh at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining HNX 30 and Thanh Thanh into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HNX 30 and Thanh Thanh Cong, you can compare the effects of market volatilities on HNX 30 and Thanh Thanh and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in HNX 30 with a short position of Thanh Thanh. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNX 30 and Thanh Thanh.

Diversification Opportunities for HNX 30 and Thanh Thanh

0.45

Correlation Coefficient

HNX 30  Thanh Thanh

Very weak diversification

The 3 months correlation between HNX and Thanh is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding HNX 30 and Thanh Thanh Cong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thanh Thanh Cong and HNX 30 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on HNX 30 are associated (or correlated) with Thanh Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thanh Thanh Cong has no effect on the direction of HNX 30 i.e., HNX 30 and Thanh Thanh go up and down completely randomly.

Pair Corralation between HNX 30 and Thanh Thanh

Assuming the 90 days trading horizon HNX 30 is expected to under-perform the Thanh Thanh. But the index apears to be less risky and, when comparing its historical volatility, HNX 30 is 1.48 times less risky than Thanh Thanh. The index trades about -0.45 of its potential returns per unit of risk. The Thanh Thanh Cong is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  1,285,000  in Thanh Thanh Cong on October 9, 2024 and sell it today you would lose (70,000) from holding Thanh Thanh Cong or give up 5.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

HNX 30  vs.  Thanh Thanh Cong

Pair Trading with HNX 30 and Thanh Thanh

The main advantage of trading using opposite HNX 30 and Thanh Thanh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNX 30 position performs unexpectedly, Thanh Thanh can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Thanh Thanh will offset losses from the drop in Thanh Thanh's long position.

The idea behind HNX 30 and Thanh Thanh Cong pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.